The White House has revealed in a report that over 40 countries have been instrumental in assisting China to bypass US tariffs by diverting exports through regions subject to lower American import duties. This revelation was made on Thursday, highlighting substantial economic implications.
Among the countries identified are Canada, India, Mexico, Japan, and South Korea. According to the report, this circumvention has allowed China to avoid tens of billions of dollars in tariffs, significantly impacting US revenue and employment, as stated by Peter Navarro, a White House trade adviser.
Reacting to the report, a representative from the Chinese embassy in Washington asserted that “trade wars have no winners.” The spokesperson criticised the US’s tariff measures, warning that agreements pertaining to transshipped goods should not unfairly affect third-party nations.
This report emerges amidst escalating sanctions between the US and China and precedes a crucial meeting between US President Donald Trump and Chinese Leader Xi Jinping in Washington slated for September. The strategic timing heightens its significance in ongoing trade discussions.
Transshipping, the practice under scrutiny, involves redirecting cargo through intermediary countries to exploit lower tariffs. Estimates suggest goods worth between $30 billion and $300 billion have been rerouted in this manner, as noted by the White House, which accused China of abusing this practice to its advantage.
The White House characterised China’s actions as “fraud cloaked in paperwork,” involving the alteration and misrepresentation of goods’ origin to secure favourable tariff rates. Furthermore, the US government is reportedly utilising artificial intelligence tools to identify and prevent these transshipment activities.
Trade Negotiation Tactics
This report is anticipated to complicate negotiations, boosting the US’s leverage in trade talks. Chang Pao Li, an associate professor of economics at Singapore Management University, noted that the information could help the US argue for more comprehensive trade agreements, addressing both direct and third-party trade routes.
However, Chang also highlighted that shifts in trade patterns might result from valid operational relocations and supply-chain restructures. Thereby, regions with robust ties to Chinese supply chains could incur additional risks and costs.
Despite earlier tariffs being paused following discussions in May 2025, tension persists as both nations continue to impose new sanctions, including restrictions on certain technological exports. In April 2025, Trump enacted broad tariffs on numerous trade partners, a tactic he believes bolsters US jobs and economic growth. Although some sanctions were overturned by the US Supreme Court, Trump has found alternative legal avenues to maintain his signature policy.
Reporting based on coverage first published by bbc.co.uk.